S&P 500 Elliott Wave Technical Analysis – 5th February, 2014

I had expected choppy overlapping movement for the start of a second wave correction which is what happened.

The wave count remains the same.

Summary: A minor degree second wave has begun. I will expect choppy, overlapping movement for about one to two weeks. Tomorrow should move price higher towards a short term target at 1,769.

Click on the charts below to enlarge.

Main Bearish Wave Count.

This wave count has a higher probability than the bullish alternate. Upwards movement over the last 4 years and 11 months subdivides best as a zigzag. If something is “off” about the supposed recovery then it must be a B wave because there is plenty that is off in this scenario in terms of social mood.

It is possible that cycle wave b is over and that there has been a trend change at cycle degree (bearish wave count) or intermediate wave degree (bullish alternate below).

There is now a clear five down on the daily chart. This is indication of a trend change, at least at intermediate degree.

Downwards movement must move below 1,530.09 because this super cycle wave (II) must move below the high of super cycle wave (I).

Cycle wave c should last between one to several years and should take price substantially below 666.79.

At 454.15 cycle wave c would reach 1.618 the length of cycle wave a. It should subdivide as a five wave motive structure, most likely a simple impulse.

Movement below 1,646.47 would provide further confidence in a trend change, at least at intermediate wave degree.

If downwards movement breaches the maroon – – – channel on the monthly chart then I would discard the bullish alternate and this would be my only wave count.

Within cycle wave c no second wave correction may move beyond the start of its first wave. This wave count is invalidated with any movement above 1,850.84.

Minor wave 2 has begun. The first movement within it subdivides 3-3 and so I will expect a 5 upwards to complete an expanded flat correction. This may be either minute wave a within minor wave 2, or it may be the first structure in a double flat or double combination.

Within this first expanded flat correction minuette wave (b) is a 109% correction of minuette wave (a) which indicates an expanded flat is unfolding. At 1,769 minuette wave (c) would reach 1.618 the length of minuette wave (a). This may bring price up to find resistance at the upper edge of the parallel channel containing minor wave 1 downwards.

When minute wave a is a completed three wave structure then minute wave b downwards may make a new low beyond the start of minute wave a. At that stage we may see another low below 1,739.66.

Minor wave 2 may not move beyond the start of minor wave 1. This wave count is invalidated with movement above 1,850.84.

Bullish Alternate Wave Count.

It is possible that a new cycle degree bull market began at 666.79. So far it is not yet halfway through, and I would expect it to last for a few years (at least five more years and probably longer).

At this stage this alternate bullish wave count does not diverge from the main bearish wave count, and it will not for a few to several weeks yet.

In the mid term this bullish wave count may have seen an intermediate degree trend change.

Intermediate wave (2) must subdivide as a three wave corrective structure. The first downwards movement within it must subdivide as a five and within it no second wave correction may move beyond the start of its first wave. This trend change is invalidated with any movement above 1,850.84.

Intermediate wave (2) downwards should last several weeks to a couple of months or so, and should breach the lower edge of the wide blue channel here on the daily chart.

Intermediate wave (2) should not breach support at the lower edge of the larger maroon – – – channel which is drawn the same way for both wave counts. For this alternate intermediate wave (2) should not breach the lower edge of the acceleration channel drawn about primary waves 1 and 2, one degree higher.